Four managers on emerging markets in 2018
By Sonia Rach, 22 Dec 17
Emerging market equities have been a popular topic of discussion when looking ahead to 2018, but is this where investors are headed? Four fund managers outline reasons to remain positive in the emerging and frontier regions next year.
Oliver Bell, portfolio manager of the T Rowe Price Frontier Markets Equity Fund, believes the macro fundamentals and demographics in many frontier markets are favourable today – in some cases resembling emerging countries 15 to 20 years ago.
He said: “For example, GDP growth for many frontier markets is likely to range from about 6-9% in the years ahead, much stronger than in the developed and emerging markets universes. In addition, nearly 60% of the aggregate population in the frontier universe is below age 30. This young workforce should drive economic growth and develop into a solid middle class of consumers in many countries.
“Of course, conditions and investment opportunities will vary widely among frontier markets, even those within the same region. While stock valuations are still reasonable, and the long-term growth outlook of many corporations remains under-priced, we acknowledge there will be individual winners and losers.”
Almost half (43.30%) of the holdings in the T Rowe Price Frontier Markets Equity Fund are in the financials sector, followed by consumer staples (10.20%) and energy (9.18%).
The fund launched in June 2014 and has since outperformed the IA Specialist benchmark over a one- and three-year basis with returns of 21.7% and 52.8% respectively, versus the index’s 10.5% and 30.9%.
Bell added: “Overall, solid returns for the frontier universe over the past five calendar years, combined with durable secular growth and low correlation to the global cycle, is increasing investor attention in what has historically been a largely overlooked area of the market.
“Indicators have turned up sharply in recent months and with exchange rates looking more competitive, there is enough encouraging news flow to retain a positive outlook in 2018 and beyond.”
